CalAmp Announces Completion of Strategic Financing with Lynrock Lake
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Insights
The securing of a $45 million term loan by CalAmp signifies a strategic move to bolster its financial position amidst ongoing business transformation efforts. This influx of capital is likely to provide the company with the liquidity needed to navigate short-term operational challenges and invest in initiatives aimed at enhancing long-term profitability. The amendment of existing notes to include a security interest suggests a renegotiation of terms to possibly align with the company's current risk profile and strategic objectives.
Investors should note that the company's Q3 revenue forecast indicates a slight decline from the previous quarter, which may reflect competitive pressures and inventory adjustments within the Telematics Service Provider (TSP) market segment. However, the implementation of a cost reduction program and strategic realignment indicates proactive measures to mitigate these headwinds. The anticipated cost savings and refocused strategy could potentially improve margins and accelerate a return to growth.
Long-term effects of these financial maneuvers will depend on the efficacy of the cost reduction and strategic realignment initiatives. A successful turnaround could enhance investor confidence and lead to an upward movement in the stock price. Conversely, failure to achieve the desired financial performance could result in increased financial strain and potential dilution of shareholder value due to the convertible nature of the senior notes.
CalAmp's decision to close a substantial term loan while amending its convertible notes structure underscores a strategic pivot to reinforce its market position. This move indicates a recognition of the need to adapt to a changing competitive landscape, particularly within the TSP market segment. The company's adjustments to its financial strategy could be seen as an attempt to create a more robust framework to support its business transformation.
For stakeholders, the key to evaluating this development lies in understanding the potential of the cost reduction program and strategic realignment to drive efficiency and growth. These initiatives are essential for CalAmp to maintain relevance and competitive advantage. The focus on core business segments and customer engagement could lead to improved market share and revenue stability in the future.
However, stakeholders must remain vigilant regarding the execution risks associated with such transformations. The ability to effectively reduce costs without compromising product quality or customer service will be critical in determining the success of these initiatives. Furthermore, strategic realignments often require time to bear fruit and the market's response to these changes will be a crucial indicator of their impact.
From a risk management perspective, CalAmp's financial strategy involving the $45 million term loan and the amendment of its convertible notes introduces both opportunities and potential risks. The provision of additional capital through the term loan could serve as a buffer against liquidity risks, allowing the company to maintain operations and invest in strategic areas despite a projected decrease in revenues. The security interest added to the notes could be a measure to manage credit risk, providing lenders with collateral to secure the loan.
However, the convertible nature of the senior notes presents a potential dilution risk for existing shareholders. Should the notes be converted to equity, the increase in outstanding shares could lead to a reduction in earnings per share (EPS) and potentially affect the stock price negatively. Additionally, the financial flexibility gained through the loan must be balanced against the interest obligations that will impact future cash flows.
The company's initiatives to reduce costs and realign strategically are critical in managing operational risks. By lowering the breakeven point, CalAmp aims to become more resilient to fluctuations in demand. The success of these initiatives in mitigating the revenue headwinds faced in the TSP market segment will be a determining factor in the company's risk profile moving forward.
The company reports closing a
IRVINE, Calif., Dec. 18, 2023 (GLOBE NEWSWIRE) -- CalAmp (Nasdaq: CAMP), a connected intelligence company helping people and organizations improve operational performance with telematics solutions, today announced the closing of a
“As a long-standing investor in CalAmp, we are pleased to provide the company with additional financial flexibility to enhance its strategic positioning as it engages with new and existing customers, partners and suppliers,” said Cynthia Paul, Chief Investment Officer of Lynrock Lake LP.
“We appreciate Lynrock’s ongoing support of CalAmp’s strategy. This additional capital enhances our ability to drive our business transformation while delivering world-class telematics solutions to our customers and partners,” said Jason Cohenour, Interim CEO of CalAmp.
During CalAmp’s FY24 Q2 earnings conference call on October 5, 2023, CalAmp indicated that it expected revenues and EBITDA for FY24 Q3 to be down slightly from FY24 Q2 levels. CalAmp now expects:
- FY24 Q3 revenues will be in the
$51 million to$53 million range - FY24 Q3 ending cash will be approximately
$38 million
“During Q3, we continued to experience revenue headwinds, particularly in our TSP market segment. We continue to work closely with our TSP customers as they rebalance inventory levels and respond to competitive pressure. In response to these challenges, we recently implemented initiatives to refocus our strategy and reduce costs in order to strengthen our financial performance in the coming quarters,” continued Mr. Cohenour.
Initiatives launched in FY24 Q3 include:
- Cost Reduction Program: Intended to significantly reduce our breakeven point and to drive leverage in our business.
- Strategic Realignment: To focus resources around our core business segments, bolster customer confidence, and return to growth.
“Despite recent headwinds, CalAmp remains excited and optimistic about the future. The CalAmp team, with Lynrock’s support, is confident that the strategic actions we are taking will position the company for long-term success and value creation,” said Mr. Cohenour.
CalAmp will announce its fiscal 2024 third quarter financial results in early January and will provide additional details at that time.
About CalAmp
CalAmp (Nasdaq: CAMP) provides flexible solutions to help organizations worldwide monitor, track and protect their vital assets. Our unique device-enabled software and cloud platform enables commercial and government organizations worldwide to improve efficiency, safety, visibility and compliance while accommodating the unique ways they do business. With over 10 million active edge devices and 275+ approved or pending patents, CalAmp is the telematics leader organizations turn to for innovation and dependability. For more information, visit calamp.com, or LinkedIn, Twitter, YouTube or CalAmp Blog.
CalAmp, LoJack, TRACKER, Here Comes The Bus, Bus Guardian, CalAmp Vision, CrashBoxx and associated logos are among the trademarks of CalAmp and/or its affiliates in the United States, certain other countries and/or the EU. Spireon acquired the LoJack® U.S. Stolen Vehicle Recovery (SVR) business from CalAmp and holds an exclusive license to the LoJack mark in the United States and Canada. Any other trademarks or trade names mentioned are the property of their respective owners.
Forward-Looking Statements
This announcement contains forward-looking statements (including within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and Section 27A of the U.S. Securities Act of 1933, as amended) concerning CalAmp. These statements include, but are not limited to, statements that address our expected future business and financial performance and statements about (i) our plans, objectives and intentions with respect to future operations, services and products, (ii) our competitive position and opportunities, (iii) our comprehensive review of strategic alternatives focused on enhancing shareholder value, and (iv) other statements identified by words such as such as “may”, “will”, “expect”, “intend”, “plan”, “potential”, “believe”, “seek”, “could”, “estimate”, “judgment”, “targeting”, “should”, “anticipate”, “predict”, “project”, “aim”, “goal”, and similar words, phrases or expressions. These forward-looking statements are based on management’s current expectations and beliefs, as well as assumptions made by, and information currently available to, management, current market trends and market conditions, and involve risks and uncertainties, many of which are outside of our control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements. Particular uncertainties that could materially affect future results include any risks associated with global economic conditions and concerns; the outcome of our comprehensive review of strategic alternatives, including the availability of any strategic alternatives that are worthwhile to pursue; the effects of global outbreaks of pandemics or contagious diseases or fear of such outbreaks, such as the recent coronavirus (COVID-19) pandemic; global component shortages due to supply chain constraints, such as those caused by the COVID-19 pandemic; disruptions in sales, operations, relationships with customers, suppliers, employees; our ability to successfully and timely accomplish our transformation to a SaaS solutions provider; our transition out of the automotive vehicle financing business; competitive pressures; pricing declines; demand for our telematics products; rates of growth in our target markets; prolonged disruptions of our contract manufacturers’ facilities or other significant operations; force majeure or force-majeure-like events at our contract manufacturers’ facilities including component shortages; the ongoing diversification of our global supply chain; our dependence on outsourced service providers for certain key business services and their ability to execute to our requirements; our ability to improve gross margin; cost-containment measures; legislative, trade, tariff, and regulatory actions; integration, unexpected charges or expenses in connection with acquisitions; the impact of legal proceedings and compliance risks; the impact on our business and reputation from information technology system failures, network disruptions, cyber-attacks, or losses or unauthorized access to, or release of, confidential information; the ability of the Company to comply with laws and regulations regarding data protection; our ability to protect our intellectual property and the unpredictability of any associated litigation expenses; any expenses or reputational damage associated with resolving customer product and warranty and indemnification claims; our ability to sell to new types of customers and to keep pace with technological advances; market acceptance of the end products into which our products are designed; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive, and regulatory nature. More information on these risks and other potential factors that could affect our financial results is included in our filings with the U.S. Securities and Exchange Commission (“SEC”), including in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our most recently filed periodic reports on Form 10-K and Form 10-Q and subsequent filings, which you may obtain for free at the SEC’s website at http://www.sec.gov. We undertake no intent or obligation to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events or otherwise, which speak as of their respective dates except as required by law.
| CalAmp Investor Contact: | CalAmp Media Contact: |
| Jikun Kim | Mark Gaydos |
| SVP & CFO | Chief Marketing & Product Officer |
| ir@calamp.com | Mgaydos@calamp.com |
FAQ
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